BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 476|
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UNFINISHED BUSINESS
Bill No: SB 476
Author: Steinberg (D)
Amended: 7/2/13
Vote: 21
SENATE INSURANCE COMMITTEE : 9-0, 4/24/13
AYES: Calderon, Gaines, Corbett, Correa, Knight, Lieu, Nielsen,
Price, Roth
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/23/13
AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
SENATE FLOOR : 38-1, 5/29/13
AYES: Beall, Berryhill, Block, Calderon, Cannella, Corbett,
Correa, De León, DeSaulnier, Emmerson, Evans, Fuller, Gaines,
Galgiani, Hancock, Hernandez, Hill, Hueso, Huff, Jackson,
Knight, Lara, Leno, Lieu, Liu, Monning, Nielsen, Padilla,
Pavley, Price, Roth, Steinberg, Torres, Walters, Wolk, Wright,
Wyland, Yee
NOES: Anderson
NO VOTE RECORDED: Vacancy
ASSEMBLY FLOOR : 75-1, 9/4/13 - See last page for vote
SUBJECT : Insurance: special assessments
SOURCE : Department of Insurance
Los Angeles County District Attorney's Office
DIGEST : This bill eliminates the sunset dates for Auto
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Consumer Assessment, Organized Automobile Fraud Activity
Interdiction Assessment, and the Life and Annuity Consumer
Protection Fund, and lowers the maximum assessment of the Auto
Consumer Assessment and expands application of the Life and
Annuity Consumer Protection Fund to include life insurance and
annuity products valued at less than $15,000. This bill also
requires the Insurance Commissioner to prepare an annual report
containing information pertaining to consumer complaints,
investigations, and administrative and regulatory cases
pertaining to automobile insurance.
Assembly Amendments require the Insurance Commissioners annual
report to contain specified information pertaining to consumer
complaints, investigations, and administrative and regulatory
cases, and total aggregate annual assessment revenue and
expenditure pertaining to automobile insurance, and make
technical changes.
ANALYSIS :
Existing law:
1.Auto Consumer Assessment:
A. Until January 1, 2015, imposes on an insurer a $0.30
special purpose assessment on each vehicle insured under an
insurance policy issued in this state by the insurer;
B. Specifies that $0.20 of each $0.30 special purpose
assessment shall be used to fund specified consumer service
functions of the Department of Insurance (DOI) relating to
motor vehicle insurance;
C. Further specifies that the remaining $0.10 of each $0.30
special purpose assessment shall be used to fund the
improvement of certain consumer functions of DOI.
1.Organized Automobile Fraud Activity Interdiction Assessment:
A. Provides that each insurer doing business in this state
shall pay an annual special purpose assessment to be
determined by the Insurance Commissioner, but not to exceed
$0.50 annually for each vehicle insured under an insurance
policy the insurer issues in this state, in order to fund
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DOI's Fraud Division and the Organized Automobile Fraud
Activity Interdiction Program;
B. Provides that, of the funds collected, 42.5% are
required to be distributed to district attorneys, 42.5% are
required to be distributed to DOI's Fraud Division, and 15%
are required to be distributed to DOI of the California
Highway Patrol, to be used as provided;
C. Provides that this assessment be repealed on January 1,
2015.
1.Life and Annuity Consumer Protection Fund:
A. Creates the Life and Annuity Consumer Protection Fund as
a special account within the Insurance Fund until January
1, 2015;
B. Requires each insurer admitted to transact insurance in
this state to pay a fee determined by the Insurance
Commissioner (Commissioner), not to exceed $1, for each
individual life insurance policy and each individual
annuity product that it issues to a resident of this state
with a value of $15,000 or more;
C. Provides that if an insurer elects to charge the
purchaser of a life insurance policy or annuity product for
this fee, the fee is required to be set forth as a separate
charge in the contract schedule or premium notice;
D. Provides that the monies in the Life and Annuity
Consumer Protection Fund are to be distributed, as
provided, and are required to be used exclusively for the
purpose of protecting consumers of life insurance and
annuity products in this state; and
E. Requires that 50% of the monies in the fund be
distributed within DOI for functions related to individual
life insurance and annuity products, including, but not
limited to, educating consumers in all aspects of life
insurance and annuity products, consumer protection,
purchasing and using insurance and annuity products, claim
filing, benefit delivery, and dispute resolution.
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This bill:
1.Auto Consumer Assessment:
A. Revises and recasts provisions relating to the Auto
Consumer Assessment, deletes the date of repeal, and
requires a special purpose assessment of $0.25 until
January 1, 2016, and not exceeding $0.25 thereafter, on
each vehicle insured under an insurance policy issued in
this state by the insurer;
B. Specifies that, upon appropriation, two-thirds of the
special purpose assessment be used for the purpose of
funding the consumer service functions of DOI related to
regulating automobile insurers, as provided, and one-third
of the special purpose assessment be used for the purpose
of improving consumer functions of DOI, related to
regulating automobile insurers, as specified;
C. Authorizes DOI, upon appropriation by the Legislature,
to use up to $0.05 of the $0.25 special purpose assessment
revenues collected to notify insurers and other members of
the public about the existence of any low-cost automobile
insurance program;
1.Organized Automobile Fraud Activity Interdiction Assessment:
A. Revises and recasts provisions relating to the Organized
Automobile Fraud Activity Interdiction Assessment;
B. Deletes the date of repeal;
C. Provides for the distribution of funds by the
Commissioner upon appropriation by the Legislature.
1.Life and Annuity Consumer Protection Fund:
A. Revises and recasts provisions relating to the Life and
Annuity Consumer Protection Fund, deletes the date of
repeal, and requires that the monies distributed by the
Commissioner, upon appropriation by the Legislature, fund
the reasonable costs incurred in regulating entities
transacting life insurance and annuity products in this
state;
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B. Deletes the requirement that each individual life
insurance policy and each individual annuity product have a
value of $15,000 or more in order for the special
assessment to apply;
C. Requires that instead of consumer education, the monies
in the fund distributed within DOI for functions related to
individual life insurance and annuity products be used to
disseminate information to insurers, insureds, and others
regarding the applicable regulation of life insurance and
annuity products, including consumer protection, purchasing
and using insurance and annuity products, claim filing,
benefit delivery, and dispute resolution.
1.Requires the Insurance Commissioner to prepare an annual
report containing information pertaining to consumer
complaints, investigations, and administrative and regulatory
cases pertaining to automobile insurance.
Background
Auto Consumer Assessment . Auto insurers doing business in
California must pay an annual assessment of $0.30 for each
insured vehicle. Insurers may recoup the assessment via an
insurance policy premium surcharge. The funds collected are
used by DOI to research consumer auto-related unfair claim
practice complaints; investigating and prosecuting auto-related
producer licensee violations; auto-related educational materials
for consumers; and outreach activities for the California Low
Cost Automobile Insurance Program. The assessment sunsets on
January 1, 2015.
Organized Automobile Fraud Activity Interdiction Assessment .
Auto insurers must pay an annual assessment, determined by the
Commissioner but not to exceed $0.50 for each insured vehicle.
Insurers may recoup the assessment via an insurance policy
premium surcharge. The funds collected are used for activities
relating to investigating and prosecuting organized auto
insurance fraud in California. Funds are allocated by the
Commissioner to local district attorneys (42.5%), DOI (42.5%)
and the California Highway Patrol (15%). This assessment is
scheduled to sunset on January 1, 2015.
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The primary focus of the program is directed at organized
criminal activity which often involves the staging of automobile
accidents and the filing of fraudulent automobile accident or
damage claims.
DOI Fraud Division . According to DOI's 2011 Annual Report,
during Fiscal Year 2010-11, the Fraud Division assigned 181
new cases and 239 referrals to prosecuting authorities.
Potential losses amounted to $3,647,929.
District Attorneys' Organized Automobile Fraud Activity
Interdiction Program . According to DOI's 2011 Annual Report,
during Fiscal Year 2010-11, ten counties were awarded grant
funding totaling $6,586,044. The grant-awarded district
attorneys reported 249 arrests, which included many of the
Fraud Division arrests. District attorneys prosecuted 252
cases involving 551 defendants with chargeable fraud totaling
$8,895,149. District attorney prosecution outcomes totaled
263 convictions.
Life and Annuity Consumer Protection Assessment. The Senate
Insurance Committee held a hearing in February 2003 to
investigate financial abuse of seniors; part of the hearing was
dedicated to considering senior financial abuse related to the
sale of annuities. The following year, AB 2316 (Chan, Chapter
835, Statutes of 2004), established the Life and Annuity
Consumer Protection Fund.
To support the fund, Insurers must pay a $1 annual fee on each
new life insurance policy and annuity product valued at $15,000
or more. Insurers may, however, recoup the assessment via an
insurance policy premium or contract surcharge. The funds
collected are used for investigation, prosecution and
education/outreach activities relating to individual life
insurance and annuity products with 50% allocated to DOI and 50%
to local district attorneys via grants awarded by DOI.
Enforcement Actions and Prosecutions. According to DOI's 2011
Annual Report, in 2011, DOI opened 2,221 consumer complaints
and 175 investigations and referred or reported 41 cases to
prosecuting agencies, with 21 administrative or regulatory
cases referred to the DOI's Legal Division. Eight
administrative or regulatory actions were taken.
Senior Outreach. A portion of the fund goes to consumer
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education events targeted for senior. According to DOI's 2011
Annual Report, DOI participated in approximately 60 senior
outreach events, during calendar year 2011, in which staff
discussed issues such as purchasing annuities, and scams
committed against seniors in purchasing insurance, including
life insurance and annuities. DOI also distributes
information brochures concerning insurance topics to the
public during outreach events and developed and conducted an
advertising campaign called Senior Advisory, which is placed
with various magazine publications throughout the state.
Prior Legislation
SB 940 (Speier, Chapter 884, Statutes of 1999), established fees
for the Auto Consumer Assessment through January 1, 2007 of
$0.50 on each automobile policy to support DOI's automobile
fraud division and $0.30 per policy to support consumer
protection activities.
AB 1183 (Vargas, Chapter 717, Statutes of 2005), extended the
sunset date for the Auto Consumer Assessment to January 1, 2010.
AB 601(Garrick, Chapter 247, Statutes of 2009), extended the
sunset date for the Auto Consumer Assessment from January 1,
2010, to January 1, 2015.
AB 1050, (Wright, Chapter 885, Statutes of 1999), created the
Organized Automobile Fraud Activity Interdiction Program in
Fiscal Year 2000-01; increased the auto fraud fee from $1.00 per
auto policy per year to $1.50 per policy per year; and directed
that the additional $0.50 fund three to six new grants to fight
organized auto fraud activity.
AB 1183 (Vargas, Chapter 717, Statutes of 2005), extended the
sunset date for the Organized Automobile Fraud Activity
Interdiction Assessment to January 1, 2010.
SB 1847 (Senate Banking, Finance and Insurance Committee,
Chapter 405, Statutes of 2006), revised various reporting
requirements including reports on workers' compensation and auto
insurance fraud.
AB 1401, (Aghazarian, Chapter 335, Statutes of 2007), increased
the assessment on insurers that funds the activities of the
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Fraud Division in DOI, and made other changes to the
administration of the fraud program.
AB 2143, (De León, Chapter 445, Statutes of 2008), extended the
sunset date for the Organized Automobile Fraud Activity
Interdiction Assessment from January 1, 2010, to January 1,
2015.
AB 2316 (Chan, Chapter 835, Statutes of 2004) created the Life
and Annuity Consumer Protection Fund and established the $1
annual fee on each new life insurance policy and annuity product
valued at $15,000 or more.
AB 76 (Yamada, Chapter 75, Statutes of 2009), extended the $1
fee based on individual life insurance and annuity products
worth $15,000 or more issued by insurers until January 1, 2015,
that is dedicated to protecting consumers of insurance products
and required the Commissioner to annually publish a report
detailing certain consumer protections.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Estimated revenue decrease of $778,000 in FY 2013-14 and
FY 2014-15 and revenue of $7.2 million annually thereafter
for the Auto Consumer Assessment (Insurance Fund).
Estimated revenue of $6.3 million in FY 2014-15 and
$12.6 million annually thereafter for the Organized Auto
Fraud Assessment (Insurance Fund)
Estimated revenue increase of $426,000 in FY 2013-14 and
FY 2014-15 and revenue of $1.7 million annually for the
Life and Annuity Consumer Protection Assessment (Life and
Annuity Consumer Protection Fund)
SUPPORT : (Verified 9/4/13)
Department of Insurance (source)
Los Angeles County District Attorney's Office (source)
California Advocates for Nursing Home Reform
California Association of Health Underwriters
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California District Attorneys Association
Congress of California Seniors
National Association of Insurance and Financial Advisors of
California
San Diego County District Attorney's Office
United Policyholders
ARGUMENTS IN SUPPORT : According to the author's office, this
bill seeks to provide a continuous and reliable funding source
for supporting critical consumer protection activities relating
to insurance fraud. Additionally, this bill reduces the auto
consumer assessment amount to help eliminate the current fund
gap between revenue and expenditures, and provides the
Commissioner the authority to adjust the assessment, up to the
$0.25 cap, to help prevent or minimize any future gaps.
ASSEMBLY FLOOR : 75-1, 09/04/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chesbro, Conway, Cooley, Dahle, Daly,
Dickinson, Donnelly, Eggman, Fong, Fox, Frazier, Beth Gaines,
Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray, Grove,
Hagman, Hall, Harkey, Roger Hernández, Holden, Jones,
Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Medina, Mitchell, Morrell, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, V. Manuel Pérez,
Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting,
Wagner, Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John
A. Pérez
NOES: Chávez
NO VOTE RECORDED: Mansoor, Melendez, Vacancy, Vacancy
AL:nl:e 9/5/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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